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The FCC, the OCCs and the Exploitation of Affection

Date Issued:

June 1, 1985

John Haring.

OSP Working Paper 17 (June 1985) provides an economic framework within which to analyze GTE's (and others') attempts to exploit the government's affection for competition. To this end, Haring first characterizes "economically optimal" government intervention in the marketplace and then describes a number of circumstances under which nonoptimal intervention is likely to occur.

Haring claims that an important potential source of governmental failure rests in the fallacious notion that deregulation can be permitted by regulators only when markets become "competitive." That notion is fallacious, he contends, because it characterizes competition as a static goal rather than a dynamic process. Competition is a means, not an end. Haring concludes that a failure to draw and act on this important distinction means that policymakers run the risk of creating a wholly artificial industry structure based on inefficient pricing and entry.